Implementing rolling forecasting in people-centric organizations
What is rolling forecasting?
Rolling forecasts are a concept in planning designed to help you find opportunities even in the face of extreme uncertainty and competition.
They evaluate performance against key drivers on a continual basis throughout the year. Allowing your teams to create a more realistic picture of the short and medium term future. Because it allows for a more accurate assessment of conditions and likely outcomes, many organizations are beginning to use rolling forecasts to replace traditional budgeting and planning entirely.
Rolling forecasting allows your teams to make more timely adjustments in the face of developing circumstances. Something that’s almost a necessity in an age of unprecedented uncertainty, in which a once-yearly plan simply can’t account for the changes that may occur over the course of that year. Rolling forecasting systems allow your teams to incorporate new insights and big changes into their models on the spot, giving you a better idea of the reality of your financial position.
How does a rolling forecast differ from the traditional kind?
The main difference between a rolling forecast and the traditional model is that rolling forecasts do not make use of a fixed fiscal year. Instead, they use a continuous “roll,” with older periods being dropped and new periods added as time moves forward. This dispenses with the need for a fixed annual budget and benchmarking by particular fiscal years.
This means that businesses revisit financial strategy and plans throughout the year to make sure resources and activity remains aligned. But this creates the advantage of a more nimble and responsive organization. Empowered to focus on steering performance to align with changing conditions with increased agility, flexibility, effectiveness, and future-focus.
How do we implement a rolling forecast effectively?
There’s no one-size-fits-all approach or widely accepted best practice for implementing rolling forecasts. Every business and organization should develop their approach in the context of its own KPIs and business drivers, and internal timelines and dynamics. But the following steps can provide you with a solid foundation and approach to build the backbone of an effective rolling forecast.
1. Formulate strategy and identify your goals
Without a goal, it’s difficult to score. Your forecast has to be established with an initial strategic goal in mind. This also requires you to engage stakeholders – both to agree your goals and to convince them of the ability of this new process to meet their needs.
2. Determine who needs to contribute
Not everyone will need to be involved in the process, but many stakeholders will need to be engaged to ensure success. Pick out your team based on their ability to contribute relevant information and insight.
3. Establish your time horizons for increments and your timelines for goals
One of the main advantages of the rolling forecast is that you can choose a timeframe to forecast that fits your organization’s needs. Use your setup period to consider what length of time works best – whether it’s 12 months, 18 months, nine quarters, or a combination of months and quarters split into different sub groupings.
4. Identify quantitative and qualitative inputs
Determine the metrics that you’ll use to measure the drivers that ultimately grow the business. Make sure they’re the right choices to enable consistent decision making and can inform your what-if analyses and long range plans.
5. Identify and vet your data sources
Take the time to ensure your data sources are correct, hygienic, and compatible with your modelling approaches. (As with any new process, your earlier periods will likely require a lot more scrutiny than later periods to ensure good data hygiene.)
6. Deploy appropriate technologies and processes
Forecasting in spreadsheets isn’t ideal. Attempting to manage rolling forecasts in spreadsheets is even less ideal. Make sure you have a platform in place that’s flexible enough to adapt to changing circumstances and has the functionality to support your team’s needs.
7. Put your scenario analysis and modelling in place
This is another area where you’ll need robust technology to support your teams. Rolling forecasting’s flexibility rests partially on your ability to examine multiple what-if scenarios and model their potential impacts on your organization. Check out some of the cloud based planning technologies on the market to find a solution that works for you.
8. Use the rolling forecast to track your performance
You’ll now have the ability to make more granular decisions based on increased visibility of performance. Along with the flexibility to make adjustments to keep your goals achievable.
How can Unit4 help you create rolling forecasts?
Creating a working rolling forecast can provide a powerful advantage to your organization – whatever industry you work in. Our FP&A solution provides you with that capability in a platform specifically designed to meet the needs of people-centric industries. To find out more, check out our FP&A product page or click here to book in a virtual demo.
